New law offers flood insurance relief to Marshfield homeowners

Wednesday

Jul 30, 2014 at 5:15 AM

New legislation offers property owners significant savings on flood insurance by providing them the opportunity to insure only the balance of their mortgage, but could have risks if a home is destroyed by a flood.

Staff Reporter

As homeowners in Marshfield and Scituate continue to deal with the challenges of rising flood insurance and changing flood maps, new legislation could offer relief to those worried about losing their homes from the cost of insurance.

Gov. Deval Patrick signed into law on Wednesday, July 23, legislation that offers property owners significant savings on flood insurance by providing them the opportunity to insure only the balance of their mortgage.

The legislation also bans banks from forcing coverage of the contents of a person’s home, state Rep. Jim Cantwell, D-Marshfield said.

Marshfield Selectmen Vice Chairman Matthew McDonough and Scituate Selectmen Chairman John Danehey and Selectman Marty O’Toole joined Cantwell, state Sen. Robert Hedlund, R-Weymouth, and other officials in Boston last week as Patrick signed the bill at the State House.

“This is a great piece of legislation that will help hardworking people who live within the flood zone,” Danehey said. “People who live in the flood zone will now be provided an option to either cover their homes with insurance to the fullest extent and pay hefty premiums, or to the value of their mortgage.”

Under the legislation, for instance, a person whose home is worth $400,000 and has a $50,000 mortgage would now have the choice to either insure only $50,000 or opt for additional insurance up to the $250,000 limit, Cantwell said.

There is a risk, however, in choosing the lower coverage, said Peter Forman, president and CEO of the South Shore Chamber of Commerce. Those homeowners might not have enough money to rebuild if their home is destroyed in a flood, he said.

Scituate Selectman Marty O’Toole, who testified for the bill, said the choice offered in the legislation will benefit homeowners in Marshfield and Scituate.

“In the past, even if you have a very small mortgage on your home, you would have to carry a $250,000 policy,” he said. “Now that is based on what you owe.”

Cantwell said the legislation would help many homeowners who were being forced to take more insurance than they needed.

“I am certain that this legislation is going to help hundreds of families across the state to stay in their homes who otherwise would not be able to afford to make payments on their flood insurance,” he said.

Hedlund said in a statement that while the law helped address concerns about the affordability of flood insurance, it was important to make sure those choosing lower coverage understood the risk.

“I am confident homeowners will intelligently weigh any risk against their needs and other financial commitments,” he said.

Forman said should a property owner choose to only insure the balance of his or her mortgage and the person’s home is destroyed in a flood, they will only be reimbursed the value of their mortgage.

If property owners go that route, they will lose the value that their property has built up by appreciation and paid debt, he said.

“The result would be no remaining debt, but no money from insurance to rebuild or buy a new home, and the only return on your home investment would be the vacant land,” Forman said. “That’s the risk, but that only applies if the house is totaled by flood.”

Forman added that for some, choosing to insure a lesser value “may be an acceptable risk” and that the law “will be helpful but it isn’t for everybody.”

Christopher Haraden, a realtor and director of education and agent services for Jack Conway, Realtor, said that despite the risk, the legislation could help homeowners who are being forced to get flood insurance for the first time under the new Federal Emergency Management Agency’s (FEMA) new Flood Insurance Rate Maps.

The maps are used by FEMA to keep record of data that includes storm tides, river flow and rainfall, among other statistical factors that outline flood risks.

The latest flood hazard mapping includes homes and properties that were not previously considered part of a flood zone.

“People looking at homes that had never seen much flood damage or any flood damage were now in the mix,” Haraden said. “This makes it easier for these people to opt out and say I only need this much coverage, I’m comfortable.”

Haraden said the legislation helped alleviate some homeowners’ concerns of being able to stay in their homes.

“People who want to stay in their homes who have lived there for a long time now have the option to pay less, so it’s helping them be able to stay in their homes if they choose to,” Haraden said.

The legislation could also help buyers, he said.

“Buyers looking at their budget can understand the costs better,” Haraden said. “It makes people look in the flood zones where they may have been reluctant to before.”

For Marshfield and Scituate residents, Danehey said the legislation will empower people to make decisions about their coverage so that they will be able to better manage the costs for flood insurance while managing the risk for themselves.

Danehey said there are many people who “live up and down the coastline who don’t own second homes, but who need relief from the large creditor institutions who unilaterally have increased rate coverage exponentially.”

Marshfield Selectmen Vice Chairman McDonough said the legislation showed the state government had found a way to provide relief for consumers in a federal matter.

“It’s a unique opportunity for the state to be able to provide relief and options for consumers,” he said.

Looking forward

Scituate Selectman O’Toole acknowledged the governor, as well as Martha Coakley, Cantwell, Hedlund, and Stephen Lynch for pushing the legislation forward. McDonough said that he was “extremely grateful” for all of Cantwell’s work on the issue.

O’Toole said that while the legislation was “definitely a step in the right direction,” there are “obviously things that we still need to take care of,” in regards to flood insurance and the FEMA flood maps.

The implementation of the new flood insurance rate maps was delayed until 2015 in Plymouth County, and O’Toole said Scituate and Marshfield were waiting for the maps to be redrawn.

McDonough said that Marshfield was still waiting to hear back on its appeals to FEMA about the science behind the maps.

Marshfield, Scituate and Duxbury split the cost of additional research for one of the appeals, done with the help of Woods Hole Group, Inc. of Falmouth. Each town submitted separate appeals, however.

In a second appeal, a technical report by Ransom Consulting Engineers and Scientists of Portland, Maine, Marshfield had requested a Scientific Resolution Panel.

“I look forward to moving forward and trying to see how our appeal fairs with FEMA in respect to mapping,” McDonough said. “Hopefully, we can resolve this issue so people can afford to live near the coast area.”